Category Archives: Mutual Fund Commentary

August 5, 2018

By David Snowball

Dear friends,

Thanks for your patience. The end of July and beginning of August brought a bunch of challenges.

This month’s issue has a lot of interesting content; just not quite so much as we’d planned. With luck, we’ll shift the vast bulk of it to September.

Zoom in to Charles and the MFO Premium walk-through

MFO Premium offers a ridiculous wealth of information for a Continue reading →

Launch Alert: Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZLIX) 

By David Snowball

We’ve got Coke Zero. We’ve got Pepsi Zero. I guess it’s reasonable to wonder, why not Fidelity Zero?

Wait, we don’t have Coke Zero or Pepsi Zero. They both failed in the marketplace and had to be reformulated, renamed and relaunched.

But we do have Fido Zero.

On August 3, 2018, Fidelity launched two zero/zero index funds sporting zero Continue reading →

Advice not to follow: Inverse ETFs as a hedge

By David Snowball

It’s sensible to think, in advance, about the best responses to a market that is expensive, increasingly volatile and beset by external shocks, from tariffs to rising interest rates and policy instability.

An unauthored piece in ETF Trends recently weighed in with this advice: look at buying inverse or levered inverse ETFs.

With the heightened Continue reading →

Advice not to follow, #2: Avoid ESG funds, they’re losers

By David Snowball

The most consistently strong analyses of US and world markets come from a shrinking handful of sources, The Financial Times and The Wall Street Journal prominent among them. MFO maintains a paid subscription to each.

Nonetheless, even they produce the occasional bewildering piece. In “If you want to do good, expect to do badly” (6/29/2018), the Journal’s James Mackintosh revives an old canard. “Investors are increasingly convinced that they can buy companies that behave better than the rest and make just as Continue reading →

July 1, 2018

By David Snowball

Dear friends,

Welcome to July! You shouldn’t be here.

Welcome to the Observer’s annual “summer light” issue in which you point out the obvious: you need some time away from the headlines, the daily howling, the apocalypse, the partisan glee, the certainty of boom, doom or gloom (to borrow from the name of Marc Faber’s thoughtful reports).

Setting aside the overtly political headlines, here’s a Continue reading →

Briefly Noted

By David Snowball

All the developments that are worth knowing but aren’t worth separate stories, including 50 funds that just earned headstones rather than headlines. An absolute disaster? 10% of vanishing funds promising “absolute returns.” Wells Fargo promises that you can trust them, just before announcing millions of additional fines. Tadas moves up, a favorite fund closes quick and hard, Monrad celebrates his 58th and the Mathers Fund leaves this veil of tears after 53 eventful years. Continue reading →

No country for old men

By David Snowball

With a summertime nod to William Butler Yeats, “Sailing to Byzantium,” and not so much to the movie that cribbed a line from him.

I

That is no country for old men. The young
In one another’s arms, birds in the trees,
—Those dying generations—at their song,
The salmon-falls, the mackerel-crowded seas,
Fish, flesh, or fowl, commend all summer long
Whatever is begotten, born, and dies.
Caught in that sensual music all neglect
Monuments of unageing intellect. Continue reading →

If you were a manager, you’d be running a managed futures fund

By David Snowball

You may not know it. You may not want to admit it. But you’d certainly be running one.

How do I know? Because managed futures funds operate exactly the way you do. Managed futures funds are momentum investors; they choose some number of asset classes (US stocks, currencies, EM bonds, commodities, whatever) to include in their portfolios. They then invest in the asset classes that show the greatest upward momentum, avoid assets that are drifting, and short those that are falling. You could also imagine a control panel with eight toggle switches, one for each asset class, and three positions for each switch (positive, neutral, negative). Managers look at relative strength data and might flip Continue reading →

Morningstar Minute

By David Snowball

The Mutual Fund Observer is the product of a virtual team and, when our colleagues from England and Trinidad were working with us, a virtual global team. Chip and I reside in Iowa, Ed and Sam in Illinois, Charles in California, Bob C in Ohio and Dennis in Montana. One of the great attractions of the Morningstar conference is that it gives us a chance to work side-by-side on interviews and stories, and to share quick and personal reactions to the ideas and personalities we encounter.

As ever, we’ll try to offer some quick responses in the form of end-of-day posts to Continue reading →

To the shareholders of Quaker Event Arbitrage Fund: open your danged mail!

By David Snowball

Quaker Funds, based in Berwyn PA, are a small family at tactical allocation funds. As they imagine a transition which will include an ESG focus, it became clear that Thomas Kirchner’s event-driven fund would be something of an anomaly. Event arbitrage funds aim to profit from predictable but short-lived market anomalies when, for example, a firm announces a change of control or reorganization. Limiting himself to relatively rare events in a relatively limited slice of the equity universe makes very little sense, so QEAAX/QEAIX is trying to join the Continue reading →

Briefly Noted

By David Snowball

Updates

In October 2016, Dennis Baran profiled City National Rochdale Emerging Markets (RIMIX/CNRYX). His bottom line on the fund,

CNRYX offers an investor exposure to emerging markets by its concentrated strategy in Asia. Since inception, the fund has adhered to its six-country Asian allocation and not included other EM Asian countries or EM countries outside of that region in any meaningful way. The manager believes that the long-term positives of the region discussed here can become a virtuous cycle that could last for decades and lead to fund outperformance. The results thus far support that thesis: the fund has earned a five-star designation from Morningstar, is ranked highest by Lipper in total return, consistent return, tax efficiency, expense, and is a MFO Great Owl.

Continue reading →

May 1, 2018

By David Snowball

Dear friends,

If you’re ever had cause to poke around MFO, perhaps “About Us” or “Support Us,” you’ll have spotted the younger me and the younger version of my son, Will. We were poking around England seven years ago, around the time we launched MFO, and we wanted to give folks a peek at the people behind the text. Continue reading →

Rolling Down the Appian Way

By Edward A. Studzinski

“To succeed in the world, it is not enough to be stupid, you must also be well-mannered.”

Voltaire

There is a show on Showtime cable that purports to give a pretty good reading of the world of hedge funds and their masters, called “Billions.” It is now into its third season. A scene in the third episode of this season resonated with me regarding some of the issues and problems that active managers face today. The main character, Bobby Axelrod of Axe Capital, has surrendered his rights to trade as a hedge fund manager/chief investment officer in return for having his personal capital unfrozen and thus accessible. His successor as Chief Investment Officer at the firm, Taylor Mason, has begun a search to find some quantitative managers that can be brought into the firm, hoping they will be additive to the Continue reading →

The Morningstar Minute

By David Snowball

Morningstar’s plan to roll out their own family of mutual funds, for use with their managed portfolio service, is becoming more concrete. In an April 23, 2018 filing with the SEC, Morningstar notes that they’re in “the quiet period” required by the SEC; nonetheless their filing says a lot.

Morningstar will offer nine funds to their Morningstar Managed Portfolio clients. That’s a booming Continue reading →

New York AG forces fund companies out of the indexing closet

By David Snowball

(with special thanks to rforno of MFO’s Discussion Board for the title)

The New York State Attorney General’s office has weighed-in on behalf of investors, and active share. Active share is a measure of the extent of the difference between what’s in fund’s portfolio and what’s in the fund’s benchmark index. If your fund holds all the same stocks in all the same percentage as its benchmark, then its active share is zero. A zero active share is good if you’ve bought – and are being charged for – an index fund. A zero active share is bad is you were sold – and are being charged for – something masquerading Continue reading →

Living a Rewarding Retirement : Settling into Retirement, May, 2018

By Robert Cochran

There have been many changes for me since August 31, 2017.  On that day, I officially retired as partner and Chief Compliance Officer of PDS Planning, Inc. in Columbus.  Having worked for a total of almost 50 years (five of those while I was in college), there was more than a bit of trepidation as I neared retirement.  Would I really fill my time?  Would I find myself longing to be at work again, missing the daily interactions with colleagues and meetings with clients? Would I be able to sit back and not be on top of the financial markets?  These were just a few of the thoughts running through my 67 year-old brain as I cleaned out my desk and office.

Notice that I did include the future of the company I helped build in Continue reading →